The Value of Financial Planning
Preston C. Sharpe, CFP® AAMS®
Establishing a successful financial plan is just like putting a puzzle together: it is accomplished most effectively when you have all of the pieces laid out on the table as well as the picture on the box so you know how those pieces should fit together. Each piece of the puzzle needs to be put in place in such a way that allows the overall picture to be properly shown. This is where our team at Derbend Asset Management brings the most value to our clients. At Derbend, we have advisors with expertise in the fields of investment management, tax planning, estate law, and holistic financial planning. Each member of the team at Derbend also brings a passion for serving our clients and the community. We love having families and business owners walk through our doors, sitting down with them in our meeting room overlooking the beautiful Lake McIntosh, and finding out how we can best serve them. The concept of “experience vs. quick and convenient” is seen everywhere in our society. If you’ll take a moment, let me illustrate for you another battlefield where the struggle between experience and convenience can be found.
When our children have a birthday, our family tradition is to go eat at the restaurant of the birthday child’s choosing. My wife and I will list out some options to help in their decision-making process. We try to subtly steer them away from anywhere with a mascot or a playground- usually to no avail. Yes, it’s quick, easy, and occasionally comes with a toy whose structural integrity will hopefully survive the ride home. While the kids are screaming through their third ride down the playground slide, it’s times like these that cause me to reflect on the idea of convenience vs. quality.
Choosing a restaurant for that all-important birthday outing is not unlike deciding how to plan for retirement. If you want something quick and easy that will check off a box, go ahead and start your online search for “retirement planning calculator.” You’ll be instantly inundated with options with which to ensure you’re properly prepared for retirement. If you decide to spend some time filling out these calculators, you will also notice that your results will vary considerably. You will leave one site with sweat on your brow as you find out you are running out of money in five years while the results of another calculator with the same inputs will have you pricing out fishing boats afterwards. No matter the variation of results you get from these sites, there will be one constant: you spent a matter of seconds filling it out to click one button for your results- quick and easy. Fast food restaurants will have you order your meal in just the same manner. In fact, they have their different meals assigned a number: “I’ll have a #1 with a sweet tea.”
For some, especially when celebrating a special occasion, they want a dining experience. It is a true experience that requires the efforts of many elements working in concert: the host staff to be your first encounter at the front of the restaurant, the server to ensure each aspect of the meal was exactly how you wanted, the chef choosing the best ingredients and equipment with which to prepare your meal, and the restaurant management building the best team and creating an environment in which both customers and employees can thrive. It was a true, holistic effort with a common goal. Not every meal can be the “experience” described above. Going through the drive-thru or sitting down for a fancy meal is not a life-or-death decision. This is simply a metaphor for the significant choices we face when planning for retirement.
This past summer, I attained the CERTIFIED FINANCIAL PLANNER™ designation. It is the highest level of certification that a financial planner can achieve due to the length and rigor of the certification process as well as the high standards set forth by the CFP Board. This achievement was the culmination of almost two years’ worth of education. Before continuing, please allow me a moment to acknowledge the fact that this was by no means an individual accomplishment. I want to thank my wife and children for their sacrifices while I studied in the late nights and early mornings. My mother, mother-in-law, and father-in-law for keeping our children at times so that I could study or take a practice exam. I also want to thank the team at Derbend for their constant encouragement and support during this process.
The most important lesson I learned from my educational experience is that individuals with a substantial net worth can face many unique challenges that require collaboration between all financial aspects of their portfolio. Some of these aspects can include tax implications- both during retirement and at death, estate planning to ensure a proper legacy, gifting strategies, risk management, or selling a business. The CFP Board defines financial planning as “a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.” It is this collaboration and integration that sets apart a holistic financial plan from simply making a few clicks on a website. For those individuals with a large net worth looking to retire, the question needs to be more than “Can I retire?” The questions that should be on their minds are “When can I retire?” and “What will my retirement look like?” For larger and more complex estates, each aspect of an individual’s financial picture should be integrated and managed together. The investment portfolio needs to be managed with the tax implications in mind. The estate plan needs to be established with a full understanding of the individual’s retirement income needs.
A truly successful financial plan involves a relationship between the planner and client. Where that relationship begins to take root is when the planner and client get beyond the “nuts and bolts” of the plan. The plan itself is more than a piece of paper with numbers and graphs. A true holistic financial and estate plan built on a relationship is sitting in a room with clients and their children, grandchildren, and other loved ones discussing what to do when the unthinkable happens. It is having those difficult conversations with a client and their loved ones, holding their hands, and even passing around the box of tissues. There can certainly be tears shed in these discussions as well as the occasional laughter (we all have that one family member). What is most important with these family discussions is the love that is shared when considering the options on how the client’s estate should be passed on. These conversations are difficult to initiate but all parties involved come away at peace with having gone through it.
You have worked your entire life to build your net worth but determining your net worth is more than a simple accounting exercise. It is defining what legacy you want to pass on to your loved ones. You have invested your time, love, hopes, and dreams into your children, grandchildren, and other loved ones. With proper legacy planning, you are able to help your loved ones for multiple generations invest into building their own legacies: funding a college education to chase their dreams, or the down payment on their first house to begin building their own family. Gifting strategies during life as well as legacy planning after death can help in building generational wealth for your heirs for generations to come.
When you look at the names of the advisors at Derbend, you’ll notice that what follows them is an alphabet soup of credentials: MBA, J.D., AAMS®, CPA, and CFP®. These credentials represent years of, not just experience, but also education that has been attained on the way to becoming experts in the fields necessary to develop and implement a financial plan for each of our clients. All of that education and experience coupled with an incredible administrative staff, allows Derbend Asset Management to not only put together the pieces of the financial puzzle, but also create a collaborative experience that allows our clients to achieve their financial goals.